ESG encompasses various areas including, but not limited to, global warming, climate change, air and marine pollution, biodiversity, D&I, human rights, misleading advertisement, and corporate governance. As such, Japan does not have a single comprehensive law that governs ESG, rather it has many separate laws which make up its regulatory structure on ESG matters.
Over the past few years, various laws related to ESG have been amended and authorities including the Ministry of the Environment (“MOE”), the Financial Services Agency (“FSA”), the Ministry of Economy, Trade and Industry (“METI”), the Ministry of Health, Labour and Welfare (“MHLW”), the Sustainability Standards Board of Japan (“SSBJ”), and the Tokyo Stock Exchange (“TSE”), have implemented or updated regulations and guidelines related to ESG. Note that the SSBJ standard is now published and will become the new standard for listed companies.
To understand the ESG regulatory structure in Japan, it is essential to understand not only the legally binding laws and regulations but also the non-binding guidelines and voluntary corporate initiatives. These measures have the potential to effectively become the industry standard in many cases or may lead to enhancing a company’s visibility. Below is a summary of the key ESG-related regulations and initiatives in Japan as of September 2025.
What this means for in-house counsel
Monitor Upcoming Enforcement
Disclosure obligations based on SSBJ standards are scheduled to be phased in over the next several years.
Preparing for these requirements demands significant time and resources, necessitating early action. For companies, establishing information collection systems and data infrastructure in anticipation of future mandatory requirements is essential.
Enhancing Corporate Visibility
Complying with not only the laws and regulations but also non-binding guidelines, displaying environmental labels or the conformity to their standards, and implementing human rights due diligence, may enhance corporate visibility and image.
While listed companies are practically obliged to deal with ESG matters due to the disclosure of information as outlined above, it is equally important for unlisted companies to implement ESG initiatives. Since there are many guidelines, initiatives and standards other than stated above, it is important for in-house counsel to find out what is necessary for the company’s specific situation.
Risks for Ignoring ESG
Companies with insufficient efforts may face disadvantageous treatment from business partners or investment withdrawal may be considered.
Furthermore, if the media point out inadequate initiatives, tangible problems such as damage to corporate image and declining sales are likely to arise. It also carries the risk of escalating into litigation.
